Plaster Plus (Australia) Pty Ltd v Mummery
[2024] FedCFamC2G 358
•5 April 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Plaster Plus (Australia) Pty Ltd v Mummery [2024] FedCFamC2G 358
File number: MLG 2293 of 2023 Judgment of: JUDGE FORBES Date of judgment: 5 April 2024 Catchwords: BANKRUPTCY – review of decision of Registrar to make sequestration order – hearing de novo – whether requirements for making order have been established – whether court should exercise its discretion not to make order – whether there is sufficient cause not to make the order – whether petitioning creditor required to accept offer of payment plan – whether bankrupt reasonably anticipates receipt of funds – registrar’s decision affirmed and sequestration order made Legislation: Bankruptcy Act 1966 (Cth) s 40, 43, 52
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 254
Cases cited: Cassimatis v Australian Securities and Investments Commission[2016] FCA 131
Baker v Perpetual Company Limited [2012] FCA 553
Clapham v Commonwealth Bank of Australia [2013] FCAFC 84
Deputy Commissioner of Taxation v Bayeh, in the matter of Bayeh [1999] FCA 1223
Lavan Legal v Kenyon [2017] FCCA 2529
Li & Wu [2016] FCCA 2836
McIntosh v Shashoua [1931] HCA 56
Pattison v Hadjimouratis[2006] FCAFC 153
Pseudos v Commonwealth Bank of Australia (No 2) [2017] FCA 19
University of Southern Queensland v Luck[2017] FCCA 639
Vlad v Lopez (No 2) [2017] FCCA 2032
Division: Division 2 General Federal Law Number of paragraphs: 29 Date of hearing: 5 April 2024 Place: Melbourne Solicitor for the Applicant: SLF Lawyers Respondent: In person ORDERS
MLG 2293 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF SCOTT ANDREW MUMMERY, BANKRUPT
BETWEEN: PLASTER PLUS (AUSTRALIA) PTY LTD
Applicant
AND: SCOTT ANDREW MUMMERY
Respondent
ORDER MADE BY:
JUDGE FORBES
DATE OF ORDER:
5 APRIL 2024
THE COURT ORDERS THAT:
1.The Application for review of the decision of Registrar Edwards filed on 20 February 2024 be dismissed.
2.The orders of the Registrar are affirmed.
3.The Applicant for review (Mr Mummery) is to pay the petitioning creditor’s costs of these proceedings as agreed or taxed, to be paid from the bankrupt estate of the Applicant for review.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
(ex tempore revised from transcript)JUDGE FORBES
In this matter, the respondent, Mr Scott Andrew Mummery, seeks review of a decision of a registrar of the Court made on 1 February 2024. On that occasion, Judicial Registrar Edwards made a sequestration order against Mr Mummery (the Sequestration Order). The Sequestration Order also appointed a trustee of the bankrupt estate.
On 20 February 2024, Mr Mummery filed an application for review of the Sequestration Order. He seeks the discharge of that order. The petitioning creditor, Plaster Plus (Australia) Pty Ltd (Plaster Plus), seeks that his application be dismissed.
Mr Mummery relies on the following material which I have read and considered:
(1)application for review of Registrar’s decision to make a sequestration order filed on 20 February 2024 (Review Application);
(2)affidavit of Scott Andrew Mummery filed on 20 February 2024; and
(3)affidavit of Scott Andrew Mummery filed on 25 March 2024.
Mr Mummery seeks to review the Sequestration Order and an order to overturn the bankruptcy.
The Review Application itself is not clear about the legal basis for the review. In his affidavit of 20 February 2024, Mr Mummery cites three possible grounds for the review - the first one being that he had not been notified about the Court date, secondly, that he had been trying to put his indebtedness on a payment plan for a long time, and, thirdly, that he is about to receive money which is greater than the petitioning creditor’s debt.
The more recent affidavit that Mr Mummery filed on 25 March 2024 deposes to Mr Mummery’s current financial circumstances, other personal circumstances, and the unfortunate events which affected his health and resulted in the demise of his company’s operations. In that affidavit, Mr Mummery refers to his wish to have the debt put on a payment plan.
In opposing Mr Mummery’s Review Application, the petitioning creditor Plaster Plus relies on various affidavits that were before Registrar Edwards, and further materials which have been filed more recently. Those materials include the following:
(1)affidavit of service of the bankruptcy notice sworn on 22 November 2023;
(2)affidavit verifying the creditor’s petition affirmed on 18 December 2023;
(3)affidavit of service of the creditor’s petition sworn on 16 January 2023, which I note annexed various documents, including the creditor’s position, bankruptcy notice, and correspondence from the creditor’s solicitors, which drew the attention of Mr Mummery to the hearing that was to take place before the Registrar on 1 February 2024;
(4)affidavit of debt sworn on 31 January 2024;
(5)affidavit of Ms Emily Everett affirmed on 2 April 2024.; and
(6)outline of submissions filed on 4 April 2024.
The background, as set out in the outline of submissions filed by the respondent, is not seriously contested. Briefly, Plaster Plus is the creditor in this proceeding. On 19 December 2023, Plaster Plus filed a creditor’s petition seeking a sequestration order under section 43 of the Bankruptcy Act 1966 (Cth) (the Act) for a debt in the amount of $12,863.06.
As I mentioned before, Registrar Edwards made the Sequestration Order after being satisfied about various legal and procedural matters about which she had to be satisfied in order to make that order.
The Sequestration Order is now the subject of a review application by Mr Mummery. It is open to Mr Mummery to make an application of this kind pursuant to s 256(1) of the Federal Circuit and Family Court of Australia Act 2021 (Cth)[1], which entitles a party to seek review of the exercise of a power which has been delegated to a registrar.
[1] Federal Circuit and Family Court of Australia Act 2021 (Cth) s 254
Where an application is made to review a registrar’s decision, I am required to determine the matter de novo[2]. That is, I have to turn my mind afresh to all of the matters that were before the registrar, and any further matters that have been raised with me in this hearing. It is not simply a case of me determining whether the registrar was right or wrong, or whether she made some error in her decision-making. In effect, the application in relation to the sequestration order is heard by me afresh, and I am required to be satisfied that the relevant provisions of the Bankruptcy Act have been complied with. I have to be independently satisfied that there is proof of the matters in the petition, that the creditor’s petition has been properly served and that the debt on which the petitioning creditor relies is still owing. I can determine whether the Sequestration Order was properly made, or whether there might be some basis for me to not make the order or whether I should exercise a discretion to do something else.
[2] Pattison v Hadjimouratis[2006] FCAFC 153 at [3]-[20] (per Nicholson J) and [39] (per Jacobson J); Cassimatis v Australian Securities and Investments Commission[2016] FCA 131 at [12] (per Edelman J); Lavan Legal v Kenyon [2017] FCCA 2529 at [57] (per Judge Lucev); University of Southern Queensland v Luck[2017] FCCA 639 at [94] (per Judge A Kelly)
Turning then to the relevant considerations which underpin whether a Court should make a sequestration order in any given circumstances Section 43 of the Act depends upon the petitioning creditor establishing the commission of an act of bankruptcy by the debtor concerned. There are also a number of other conditions that must be satisfied, which include the residence in Australia by the debtor concerned at the time of the commission of the act of bankruptcy.
Section 40(1) of the Act provides a list of the matters which constitute acts of bankruptcy which can serve the basis for the issue of a creditor’s petition. One of those is that the creditor has obtained a final judgment or orders against the debtor which has not been stayed, which has been served on the debtor within the requisite time, and where the debtor does not have a counterclaim, set off or cross-claim which is equal to or greater than the amount of the debt. The onus falls on a debtor to provide satisfactory proof if there is a counterclaim, set off or cross-demand. The official receiver may issue a bankruptcy notice on the application of a creditor who has obtained a final judgment subject to that amount being at least $10,000.
One of the issues raised in this proceeding by Mr Mummery is that the debt upon which the Sequestration Order has been sought is less than $10,000 and is actually in the order of $5,000 or thereabouts. The statutory minimum is $10,000.
The evidence available to me is that the bankruptcy notice identified an outstanding debt of $12,863.06. That amount comprises the judgment debt in favour of Plaster Plus, which is recorded in orders made by the Magistrates’ Court of Victoria at Moorabbin on 26 March 2021[3], plus costs and pre-judgment interest. Further costs associated with an oral examination made on 8 February 2023 and further interest comprise the debt in favour of the petitioning creditor, as set out in the bankruptcy notice.
[3] Affidavit of Debt sworn on 31 January 2024 at [2]
The bankruptcy notice issued in this matter against Mr Mummery remains unsatisfied. That is the act of bankruptcy upon which the creditor sought the making of the sequestration order. Section 52 of the Act is engaged by the non-satisfaction of that debt and the failure to comply with the bankruptcy notice. Section 52 of the Act remains engaged before me, and it requires the Court to be satisfied that the matters stated in the creditor’s petition have been verified, that the creditor’s petition has been served, that the fact of the debt on which the creditor’s petition relies is still owing and, if those requirements are satisfied, the Court can make a sequestration order against the estate of the debtor. Registrar Edwards was satisfied about the proof of those matters.
Insofar as I am required to turn my mind afresh to each of the matters required by section 52, I am satisfied, as the registrar was, that the requirements for the making of a sequestration order have been made out and that it was proper for the registrar to do so. Relying on the material that was before the registrar, which I am entitled to take into account, I am satisfied that judgment was entered against Mr Mummery by the Magistrate’s Court for the amount of $12,863.06 and that the matters stated in the creditor’s petition have been properly verified by an affidavit affirmed on 18 December 2023.
I am satisfied as to the service of the creditor’s petition, which is confirmed by an affidavit of service affirmed on 16 January 2024. Further, I am satisfied, and I do not take it to be contested, that the debt or debts on which the petitioning creditor relies remain outstanding. This is not a case where solvency is in issue.
On proof of the matters mentioned in s 52(1) of the Act a petitioning creditor has a prima facie right to the making of a sequestration order. However, under section 52(2)(d) I do have a wide discretion[4] to dismiss a creditor’s petition and there are various considerations to which the Court is required to direct itself it is considering exercising its discretion to dismiss a creditor’s petition[5]. Those include the Court being satisfied that the debtor is able to pay his or her debts[6], or that there is some “other sufficient cause [that] a sequestration order ought not to be made”[7]. The question of what qualifies as ‘other sufficient cause’ confers an “unconfined” discretion on the Court[8].
[4] Clapham v Commonwealth Bank of Australia [2013] FCAFC 84 at [54] (per North, Barker & Nicholas JJ)
[5] See eg Li & Wu [2016] FCCA 2836 at [75]-[85]
[6] Bankruptcy Act 1966 (Cth) s 52(2)(a)
[7] Bankruptcy Act 1966 (Cth) s 52(2)(b)
[8] Vlad v Lopez (No 2) [2017] FCCA 2032 at [110]; Baker v Perpetual Company Limited [2012] FCA 553 at [35]
On a review application such as this, the exercise of that discretion falls to me. I must exercise it reasonably and have regard to all the evidence before me. But is a discretion that the debtor has to persuade me to exercise. In other words, the onus falls upon the debtor to establish that there is ‘other sufficient cause’ in justifying the order not being made. The authorities make clear that the onus to establish sufficient cause rests as a matter of form and substance upon the debtor[9].
[9] Deputy Commissioner of Taxation v Bayeh, in the matter of Bayeh [1999] FCA 1223 at [12]
The Court also has power to annul a bankruptcy after a sequestration order has been made, and the circumstances in which the Court can exercise that are prescribed by section 153B of the Act. I can annul a bankruptcy if I am satisfied that a sequestration order should not have been made, or in other limited circumstances, including having regard to the solvency of the bankrupt.
Plaster Plus has submitted both that there is no proper basis for me to dismiss the creditor’s petition, nor to annul the bankruptcy. In its written outline of submissions, the respondent creditor says that Mr Mummery has failed to properly inform the Court and the respondent of all relevant material with respect to his financial affairs, has not proven his solvency at the date of the bankruptcy, or at the time the sequestration order was made.
The applicant for review has admitted in his material that he is indebted to the petitioning creditor, he has failed to explain his absence at the hearing before the registrar on 1 February 2024 and has failed to raise any clerical mistakes or errors in the judgment or order. As I have indicated, because this hearing is a de novo one, I have to turn my mind afresh to all the relevant matters, which means that the non-appearance by Mr Mummery at the hearing on 1 February 2024 does not disqualify him from advancing matters before me today, or from seeking an application for review. For the sake of the record, I should indicate that I am nevertheless satisfied on the material that Mr Mummery was properly put on notice of that hearing. In any event, where an applicant for review seeks annulment of a bankruptcy, that person carries a very heavy burden, and it is incumbent on an applicant for review to place before the Court all the relevant material with respect to his or her financial affairs, so that the Court can be properly informed and make a judgment.
It is not a requirement of the legislation that a petitioning creditor accept an offer of a payment plan, and I note that that is a matter which has been raised in Mr Mummery’s affidavit in favour of his application. At the end of the day, it is for a creditor to decline that offer and proceed with the sequestration order if it considers that to be the appropriate course[10].
[10] McIntosh v Shashoua [1931] HCA 56; Pseudos v Commonwealth Bank of Australia (No 2) [2017] FCA 19
As to Mr Mummery’s assertion that he is about to receive money which is greater than the judgment debt, there is insufficient evidence before the Court to persuade me to that view. Mr Mummery’s affidavit sworn on 25 March 2024 addresses this matter only by stating that he has “suffered a loss of earnings to be paid by the TAC”, and he has exhibited a one-page extract from an application to review a decision of the TAC made on 3 March 2023 and 7 March 2023 relating to his transport accident in 2019.
At the hearing before me today, Mr Mummery briefly developed that issue and indicated that he had suffered a loss of earnings of about $240,000-odd, about which he is currently in dispute with the TAC. Mr Mummery, of course, is hopeful that the dispute will be resolved in his favour, but the status of that dispute between Mr Mummery and the TAC is not properly informed by any of the evidence before the Court. Insofar as there may be some money or potential for money to be forthcoming at some point, the timing and the amount of that remains unclear, and the evidence is certainly not enough to persuade the Court to exercise its discretion not to make a sequestration order.
I have taken into account all of the evidence that has been put before the Court, and the written and oral submissions that I have received today. I am not satisfied that there was any error in the registrar’s decision to make a sequestration order. Registrar Edwards was satisfied, as I am on my own review of the materials, that the conditions for making the order had been proved by the petitioning creditor.
On the evidence before the Court, I am not persuaded to exercise my discretion to dismiss the creditor’s petition. I am not satisfied on the evidence that Mr Mummery can pay the outstanding debt, or that there is any other sufficient cause to set aside the order. I am aware of the unfortunate circumstances which led to the closing of Mr Mummery’s business and I have taken those into account. Nor am I satisfied that there is evidence before the Court which would justify any annulment of the bankruptcy.
For those reasons, I dismiss the application and make the following orders.
I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Forbes. Associate:
Dated: 5 April 2024
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